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Wednesday December 19, 2018

Finances

Target's Earnings Miss the Mark

Target Corporation (TGT) released its quarterly earnings report on Tuesday, November 20. The retailer delivered better-than-expected revenue for the quarter
but fell short of earnings expectations, causing shares to fall more than 9% following the report's release.

Target reported quarterly revenue of $17.82 billion. This is up from last year's third quarter revenue of $16.87 billion and above the $17.80 billion that
Wall Street predicted.

"Our team delivered another outstanding quarter, driving comparable traffic and sales growth of more than 5% and earnings per share growth of more than
20%," said Target CEO Brian Cornell. "We've made significant investments in our team heading into the holidays and they are ready to serve our guests with a
comprehensive suite of convenient delivery and pickup options, a wide range of new products and unique gift ideas and a strong emphasis on low prices and
great value."

The company announced earnings of $622 million for the quarter, which is up from earnings of $478 million one year ago. On an adjusted earnings per share
basis, the company reported earnings of $1.09 per share, which was less than the $1.12 per share that analysts predicted.

Target's largest revenue drivers for the quarter were its toys, baby and beauty categories. Toy sales in the second quarter were up 20% year-over-year. The
company expects to see its sales momentum continue in the current holiday quarter, anticipating that same-store sales will increase by approximately 5%.

Target Corporation (TGT) shares closed at $69.24 on Wednesday, down 13.3% for the week.

Lowe's Reports Q3 Earnings

Lowe's Companies, Inc. (LOW) reported quarterly earnings on Tuesday, November 20. The home improvement retailer beat earnings and revenue expectations in
the third quarter.

Lowe's announced revenue of $17.42 billion for the quarter. This is up from revenue of $16.77 billion reported in the same quarter last year and above the
$17.36 billion in revenue that Wall Street expected.

"Our top priority in the third quarter was positioning Lowe's for long-term success by identifying underperforming or non-core businesses and stores for
divestiture," said Lowe's CEO Marvin Ellison. "With our strategic reassessment substantially completed, we can now intensify our focus on the core retail
business."

The company reported earnings of $629 million for the quarter, down from earnings of $872 million one year ago. On an adjusted earnings per share basis, the
company posted earnings of $1.04 per share, which was above analysts' estimates of $0.98 per share.

On Tuesday, Lowe's announced that it will be restructuring and getting rid of some of its non-core businesses, including its Mexico operations. The company
is currently in the process of shutting down 20 of its U.S. stores and 31 of its stores in Canada. Ellison commented on the restructuring on Tuesday,
stating, "Our transformation will take time, but we have assembled an experienced team and developed a comprehensive plan to make steady progress."

Lowe's Companies, Inc. (LOW) shares closed at $88.44 on Wednesday, down 4.8% for the week.

Best Buy Beats Earnings Estimates

Best Buy Co., Inc. (BBY) announced quarterly earnings on Tuesday, November 20. The company reported earnings and revenue that surpassed analysts'
predictions.

Revenue for the third quarter reached $9.59 billion. This was up from revenue of $9.32 billion reported during the same quarter last year and above the
$9.55 billion in revenue that analysts expected.

"Similar to the first half of the year, our topline performance was helped by a favorable environment and driven by how customers are responding to the
unique and elevated experience we are building," said Best Buy CEO Hubert Joly. "We have continued to make significant progress against our Best Buy 2020:
Building the New Blue strategy, including expanding our In-Home Advisor program, growing our Total Tech Support members and completing the acquisition of
GreatCall, a leading connected health services provider for aging consumers."

Best Buy reported quarterly net earnings of $277 million, which exceeded last year's third quarter earnings of $239 million. On an adjusted earnings per
share basis, the company posted earnings of $0.93 per share, surpassing the $0.85 per share that analysts predicted.

On Tuesday, the company announced that it boosted its earnings outlook for the year. Best Buy now expects its full-year earnings to finish the year between
$5.09 and $5.19 per share, up from prior guidance of $4.95 to $5.10 per share. Analysts expect full-year earnings of $5.11 per share.

Best Buy Co., Inc. (BBY) shares closed at $62.08 on Wednesday, down 6.1% for the week.

The Dow started the week at 25,393 and closed at 24,465 on 11/21. The S&P 500 started the week at 2,731 and closed at 2,650. The NASDAQ started the week
at 7,217 and closed at 6,972.

Treasury Yields Pressured Lower

Yields on U.S. Treasury bonds dipped on Wednesday following the release of weaker-than-expected durable goods data. Earlier in the week, Treasury yields
fell following two straight sessions of losses on Wall Street.

On Wednesday, the Commerce Department reported that durable goods orders fell 0.4% in October, the largest drop since July 2017. Following the report's
release, the yield on the 10-year Treasury note fell from 3.088% to 3.066%.

Treasury prices were pushed higher at the beginning of the week as investors shifted their focus away from volatile equities and toward safe-haven
government debt. The shift caused yields to dip lower. On Tuesday, the yield on the benchmark 10-year note fell to a seven-week low of 3.036%. Bond yields
move inversely to prices.

"The near-term guidance Treasuries are taking is from broader risk assets," said Jon Hill, U.S. rates strategist at BMO Capital Markets in New York. "So
[Treasuries] are certainly paying attention to the fall in equities globally,"

Concerns regarding the growth trajectory of the global economy have also sparked demand for U.S. Treasury bonds, pushing yields lower. Analysts continue to
speculate over how a slowing global economy may impact the Federal Reserve's decision to increase interest rates in the coming months.

"I think there are very clear signs that investors are beginning to worry about weaker growth in the coming year or so, and how that's going to feed through
to corporate earnings," said Michael Pearce, senior United States economist with Capital Economics. On Monday, economists projected a 35% likelihood of two
rate hikes next year, which was down from 57% one week ago.

The 10-year Treasury note yield closed at 3.06% on 11/21, while the 30-year Treasury bond yield was 3.31%.

Mortgage Rates Drop

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Wednesday, November 21. The report revealed that mortgage rates experienced their
largest weekly drop since January 2015.

The 30-year fixed rate mortgage averaged 4.81% this week, down from 4.94% last week. During this time last year, the 30-year fixed rate mortgage averaged
3.92%.

This week, the 15-year fixed rate mortgage averaged 4.24%, down from last week when it averaged 4.36%. Last year at this time, the 15-year fixed rate
mortgage averaged 3.32%.

"The downward spiral in oil prices and a volatile equities market caused mortgage rates to decline 13 basis points to 4.81%, the largest weekly drop since
January 2015," said Sam Khater, Chief Economist at Freddie Mac. "Mortgage rates are the lowest since early October and the dip offers a window of
opportunity for would be buyers that have been on the fence waiting for a drop in mortgage rates."

Based on published national averages, the money market account closed at 1.22% on 11/21. The one-year CD finished at 2.57%.